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Here's What Investors Need to Know About PTC's Earnings Report

By Rachel Warren and Brian Withers – Dec 15, 2021 at 12:18PM

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The company released financial results for its fourth quarter and fiscal year 2021.

Computer software company PTC (PTC 1.09%) released earnings for its fourth quarter and fiscal year 2021 on Nov. 3. In this segment of Backstage Pass, recorded on Nov. 22, Fool contributors Rachel Warren and Brian Withers discuss the high points of the company's financial performance during the reporting period.

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Rachel Warren: PTC, a little complicated to explain what they do. I'm going to put it as simply as I can. PTC, founded as Parametric Technology Corporation in 1985. The company has been around a long time. It's a computer software and services company headquartered out of Boston, Massachusetts. The company serves clients across a range of industries, including automotive, the life sciences, energy, aerospace and defense, retail consumer products, medical devices. The list goes on.

These software solutions that the company offers, they help their customers do everything from utilizing 2D and 3D modeling for designs and engineering, to product data management, to developing industry of thing applications, to augmented reality experiences. If you go on the company's website, they have an interesting way of explaining what it is they do.

It says "disruption is all around us, from global pandemics to natural disasters, to societal unrest and emerging competitive threats. PTC is uniquely positioned to help companies thrive, navigating today's challenges while preparing for what's next. The world is changing around us. Industrial enterprises need a technology partner that can help them survive and thrive, wherever the situation, whatever the disruption."

Their portfolio of software solutions fall into four primary categories; computer aided design, product lifecycle management software, Internet of Things solutions, and augmented reality technology. For example, Vuforia is one of its software solutions, which it says "provides the fastest, easiest, and most advanced augmented reality content development solutions to help industrial enterprise customers address workforce challenges and meet business goals". So essentially covering a broad range of software-as-a-service solutions to industries all over the map. It does so on a very large scale.

The company recently reported its results for the 4th quarter and full-year 2021. It just marked the end of its fiscal 2021. What I'm going to do really quick here is share my screen so that we can see what that quarter and fiscal year looked like for the company. While my computer loads, one never knows how long it might take. [laughs] Sometimes, it's just taking its time.

There we go. PTC, they reported their fiscal year and 4th-quarter earnings at beginning of the month on November 3rd. This is in a company with a market cap just shy of $14 billion last I checked. Also interesting to note is that this company over the last 10 years, it has beat the S&P 500's total return by about 100%, which I found that really interesting.

This is not a company I'd heard of and I think a lot of people don't know about this, and here's the stock quietly beating the market's returns by quite a lot. Management was guiding some pretty lofty goals for the full-year 2021 and essentially either met or exceeded those projections across-the-board.

As you can see here, it was targeting between 14% and 16% annual recurring revenue growth, 19% to 20% revenue growth for the full year, 55% spike in cash flow from operations, up to 63% growth in earnings per share, and also targeting 60% year-over-year growth in free cash flow. Some pretty big goals to meet there. The company did exceptionally well in the full-year, so it closed out 2021 with annual recurring revenue of $1.47 billion, which was at the top of its projected range.

That represented a 16% jump from its fiscal 2020 annual recurring revenue. In the last three months of the year, it generated revenue of $481 million. That was up 23% from the year-ago period. For the full-year 2021, its revenue was $1.8 billion, which at 24% year-over-year, exceeded its guidance. Net income as well, the company is very profitable. Its full-year net income represented an approximate 265% increase from 2020.

Also really great GAAP operating margins in the final quarter of the year as well as for the full year. Also up notably from the same periods in 2020. The company came in with GAAP earnings-per-share of $4.03 for the full-year, so quite a bit higher than the upper-end number of a $1.84 dollar that it was projecting.

Cash flow from operations, 45 million for the quarter, with $369 million for the full year. Again, cash flow from operations was up a little bit from what management was projecting as well. Free cash flow of $344 million for fiscal 2021, which was again about $4 million above what management was projecting. The company has a lot of cash, ended the year and the quarter with $327 million in cash and cash equivalents. Just looking at this company and seeing all the industries that it serves and its balance sheet, I don't know about you, Brian, but I was pretty impressed.

Brian Withers: Yeah, I have been looking at the investor presentation and the numbers that you showed, this a really solid, well-run company. They turn their PTC, which I can't even remember what you said it was founded in the 1980.

Rachel Warren: Parametric, something.

Brian Withers: Right. They've turned that into power to create as a purpose statement. When you look at the things that they do, the Internet of Things and the augmented reality piece, I think that's a really cool way to wrap all their businesses together.

It looks like they're going from being a product company that would sell you the software and you'd load it on your servers and stuff to more of a SaaS based model and they're moving their customers through that. Anytime you go through that, the financials are lumpy as they move customers through that. But I'm impressed.

Brian Withers has no position in any of the stocks mentioned. Rachel Warren has no position in any of the stocks mentioned. The Motley Fool recommends PTC. The Motley Fool has a disclosure policy.

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